ReWalk(RWLK) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) For the nine months ended September 30, 2022, ReWalk Robotics reported a net loss of $14.3 million on revenues of $3.3 million, reflecting a widened loss compared to the prior-year period Condensed Consolidated Balance Sheets As of September 30, 2022, the company's balance sheet shows total assets of $80.8 million, a decrease from $94.8 million at year-end 2021, primarily driven by reduced cash and cash equivalents Condensed Balance Sheet Data (in thousands) | Balance Sheet Item | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $74,027 | $88,337 | | Total current assets | $78,895 | $92,521 | | Total assets | $80,771 | $94,750 | | Total current liabilities | $4,220 | $4,038 | | Total liabilities | $5,181 | $5,367 | | Total shareholders' equity | $75,590 | $89,383 | Condensed Consolidated Statements of Operations The company's revenues for Q3 2022 significantly decreased to $0.9 million from $2.0 million in the prior-year period, leading to a widened net loss Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $886 | $1,972 | $3,332 | $4,724 | | Gross Profit | $221 | $1,140 | $1,232 | $2,574 | | Operating Loss | ($5,433) | ($2,662) | ($14,097) | ($8,824) | | Net Loss | ($5,460) | ($2,675) | ($14,256) | ($8,878) | | Net Loss per Share | ($0.09) | ($0.06) | ($0.23) | ($0.21) | Condensed Statements of Cash Flows For the nine months ended September 30, 2022, net cash used in operating activities increased to $14.0 million from $8.9 million, resulting in a net cash decrease of $14.2 million Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($13,978) | ($8,903) | | Net cash used in investing activities | ($25) | ($28) | | Net cash provided by (used in) financing activities | ($183) | $79,808 | | Increase (decrease) in cash | ($14,186) | $70,877 | Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies, business operations, and financial condition, including revenue disaggregation, commitments, and outstanding warrants - The company has sufficient funds to support operations for more than 12 months from the issuance date of the financial statements, despite a net loss of $14.3 million and negative operating cash flow of $14.0 million for the nine months ended September 30, 2022[41] Disaggregation of Revenues (in thousands) | Revenue Source | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Units placed | $751 | $1,855 | $2,986 | $4,310 | | Spare parts, warranties and other | $135 | $117 | $346 | $414 | | Total Revenues | $886 | $1,972 | $3,332 | $4,724 | - As of September 30, 2022, the company had 19,420,894 warrants outstanding and exercisable to purchase ordinary shares, with exercise prices ranging from $1.25 to $9.375[99] - Subsequent to September 30, 2022, the company repurchased an additional 719,893 ordinary shares for an aggregate consideration of $679,844[122] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes the 55% year-over-year revenue decline in Q3 2022 to lower unit sales, impacting gross margin and increasing operating expenses, while confirming sufficient liquidity Overview ReWalk commercializes robotic exoskeletons and is actively pursuing broader reimbursement coverage, while the COVID-19 pandemic continues to negatively impact sales and operations - In June 2022, the company submitted a 510(k) application to the FDA for its ReWalk Personal exoskeleton system, seeking clearance for use on stairs and curbs in the United States[124] - On September 26, 2022, CMS affirmed that Medicare Administrative Contractors (MACs) have the discretion to cover and reimburse the ReWalk exoskeleton. The company submitted its first case for Medicare coverage in early November 2022[128] - The COVID-19 pandemic continues to adversely impact sales and operations due to staffing shortages in healthcare, reduced demand, and historical in-clinic restrictions, although some of these trends are reverting to pre-pandemic levels[133] Results of Operations For Q3 2022, revenues decreased 55% to $0.9 million year-over-year, gross margin contracted to 25%, and operating expenses rose significantly, leading to a wider operating loss Revenue by Product Type (in thousands) | Revenue Type | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Personal unit revenues | $822 | $1,357 | $2,837 | $3,818 | | Rehabilitation unit revenues | $64 | $615 | $495 | $906 | | Total Revenues | $886 | $1,972 | $3,332 | $4,724 | - Gross profit as a percentage of revenue decreased to 25% in Q3 2022 from 58% in Q3 2021, and to 37% for the nine-month period from 54% in the prior year, mainly due to the impact of fixed production costs on fewer sales and rising production costs[143] - Sales and marketing expenses increased 42% in Q3 2022 year-over-year, driven by higher consulting expenses related to CMS reimbursement progress and an increase in tradeshow activities as COVID-19 restrictions eased[148] Liquidity and Capital Resources The company ended Q3 2022 with $74.0 million in cash, confirming sufficient funds for over 12 months despite net loss and negative operating cash flow, while facing a Nasdaq minimum bid price deficiency - As of September 30, 2022, the company had $74.0 million in cash and cash equivalents and believes it has sufficient funds to support operations for more than 12 months[160] - On October 10, 2022, the company received a deficiency letter from Nasdaq for its closing bid price being below the minimum $1.00 per share requirement for 30 consecutive business days[163] - A share repurchase program for up to $8.0 million was approved, and as of September 30, 2022, the company had repurchased $183,540 of its ordinary shares[173][175] Contractual Obligations as of Sep 30, 2022 (in thousands) | Obligation Type | Total | Less than 1 year | 1-3 years | | :--- | :--- | :--- | :--- | | Purchase obligations | $1,637 | $1,637 | $— | | Collaboration & License Agreement | $63 | $63 | $— | | Operating lease obligations | $756 | $652 | $104 | | Total | $2,456 | $2,352 | $104 | Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk during the second quarter of 2022, referring to its 2021 Form 10-K for a full discussion - There have been no material changes to the company's market risk during the second quarter of 2022[185] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[187] - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, the company's internal controls[188] PART II - OTHER INFORMATION Legal Proceedings The company states there have been no material changes to its legal proceedings from those described in its 2021 Form 10-K - There have been no material changes to the company's legal proceedings from those disclosed in the 2021 Form 10-K[190] Risk Factors The primary update to risk factors is the company's non-compliance with Nasdaq's minimum bid price requirement, with a deadline of April 10, 2023, to regain compliance or face delisting - On October 10, 2022, ReWalk received a notification letter from Nasdaq indicating non-compliance with the minimum bid price requirement of $1.00 per share[192] - The company has until April 10, 2023, to regain compliance by having its stock close at or above $1.00 for a minimum of 10 consecutive business days, with failure potentially leading to delisting[193] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activity during Q3 2022, where 184,629 shares were bought back at an average price of $0.99 per share, with $7.8 million remaining for future repurchases Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | Total Purchased as Part of Plan | Max Value Remaining for Repurchase | | :--- | :--- | :--- | :--- | :--- | | Jul 2022 | — | $— | — | — | | Aug 2022 | — | $— | — | — | | Sep 2022 | 184,629 | $0.99 | 184,629 | $7,815,000 | | Quarter Total | 184,629 | $0.99 | 184,629 | $7,815,000 | Exhibits This section provides an index of the exhibits filed with the Form 10-Q, including employment agreements, RSU awards, and SOX certifications